Russell 2000 falls

Alex Alexandrov | Jan 10, 2008 10:59am EST | Comment

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The Russell 2000 (NYSE: IWM) and the other major U.S. indices are posting modest declines on news of poor December retail sales.

At 10:57 a.m. ET, the small-cap index was down 4.72 points, or 0.66%, to 707.40. The Dow Jones Industrial Average (INDU) had lost 29.67 points, or 0.23%, to 12,705.64.

Small-cap stocks started the day in negative territory but quickly recovered as investors apparently weighed news of disappointing December retail sales against news of a government report that showed an unexpected decline in weekly jobless claims.

The bearish pre-market mood was due to news of weak December sales at the major U.S. retailers. The main culprits appear to be the early Thanksgiving holiday, which moved some shopping days to November, as well as the deep discounts that many retailers offered to lure in shoppers.

Small-cap retailers also failed to impress, with music and apparel seller Hot Topic, Inc. (Nasdaq: HOTT) reporting that December same-store sales dropped 6.2%, leading the company to lower its fourth-quarter earnings guidance.

Similarly, Watsonville, Calif.-based boating supply retailer West Marine, Inc. (Nasdaq: WMAR) announced fourth-quarter results that disappointed analysts, while Cost Plus, Inc. (Nasdaq: CPWM) said that holiday same-store sales declined.

On the bright side, apparel retailer Eddie Bauer Holdings, Inc. (Nasdaq: EBHI) announced that fourth-quarter same-store revenue rose 4.8%.

Among the big boys, Target Corp. (NYSE: TGT) reported that net sales for the five weeks ended Jan. 5 increased a paltry 0.1%, compared with 0.6% a year earlier.

Wal-Mart Stores Inc. (NYSE: WMT), the world’s largest retailer, was the bright spot, reporting a sales increase that was in line with forecasts.

Weak retail sales could be a sign of a decline in consumption, a development which could have negative consequences for economic growth since consumption is about 70% of U.S. gross domestic product.

In other economic news, the U.S. Labor Department reported before the start of trading that jobless claims for the week ended Jan. 5 fell 15,000 to 322,000 from a slightly upwardly revised figure of 337,000 a weak earlier.

That pleasantly surprised economists, who were expecting to see an increase to 340,000 jobless claims.

Here are the current biggest percentage gainers and losers among companies with a market cap between $100 million and $750 million:

Biggest percentage gainers:

• Eddie Bauer Holdings, Inc. (EBHI), up 38% on news of a rise in same-store revenue.
• ShoreTel, Inc. (SHOR), up 12%.
• Columbia Bancorp (CBBO), up 12% on news it anticipates fourth-quarter earnings above Wall Street’s projections.

Biggest percentage losers:

• Electronics for Imaging, Inc. (EFII), down 37% on news it expects a decline in fourth-quarter earnings and revenue.
• WD-40 Co. (WDFC) down 13% on news that its fiscal first-quarter sales and profits rose but still came short of analysts’ expectations.
• The Cato Corp. (CTR), down 13% on news of a decline in December same-store sales.